Executive summary

There is a strong, positive and consistent relationship between the population size of a metropolitan area and the share of its population with a university degree. In Canada, the degree-holder share of the rural population was 7% in 2001. This share rises to about 10% for small urban areas with a population from 10,000 to 99,999, and it rises further to just under 15% for medium-sized urban areas with a population from 100,000 to 499,999. For large metropolitan areas, those with a population greater than 500,000, their degree-holder share was, on average, just over 20% (Census 2001).

Human capital, which is often measured by degree holders, has been an important source of growth for cities and a driver of differences in wage levels. Evidence from the United States, for example, clearly shows a positive association between initial levels of human capital and long-run growth. Variation in human capital is also a major determinant of wage differences across cities in France, the United States and Canada. The reason that large cities have higher wage levels is less because their large and industrially diverse economies provide firms with a productive advantage, but more because their populations tend to have invested more in their human capital through formal education.

Given the large and systematic variation in the population share of degree holders across the urban-rural spectrum, and its implications for economic welfare, a natural question is to ask what led to these patterns. It can be argued that growth in human capital can be decomposed into two processes—net migration and in situ growth—that work alone or in combination and that might result in one locale having a higher share of human capital than another.

Human-capital growth across cities may be associated with net migratory flows (domestic and foreign), where particular cities may be able to consistently attract more educated workers than they lose through migration. Most recent work that emphasises the role of human capital as a driver of growth, and therefore an important tool for economic development, has implicitly assumed that it is migratory flows that underlie much of the variation in human capital across geographic space. However, there are reasons to believe that the incentives to invest in human capital may vary significantly from place to place.

Although the literature clearly points to the importance of both in situ and migratory effects as drivers of human capital growth across cities and rural areas, their relative roles are left largely unanswered. The purpose of this paper is to understand the geographic concentration and growth of human capital across Canada's urban-rural hierarchy. Should research focus on those factors that attract human capital to a city or region, or should the emphasis be placed on those local forces that influence the decisions of individuals to invest in education? Utilizing data from the 1996 and 2001 Censuses, the paper investigates the importance of net migratory flows (domestic and foreign) and in situ growth of human capital. In so doing, it provides a perspective on the importance of these two sources of human capital growth across the urban-rural spectrum.

Perhaps the most striking finding of this paper is that the rates of degree attainment increase with city size. First, there is a clear gradient in degree attainment across the urban-rural hierarchy. The proportion of the population that spent at least the latter part of their formative years in a large urban area and obtained a degree is almost twice that of those that spent their formative years in rural parts of Canada. This provides strong evidence that a large part of the reason for the strong positive association between city size and the share of their populations with degrees is that large cities generate degree holders at a greater rate than smaller cities and rural parts of Canada do. The effect of internal and international migration is to reinforce this pattern.

The relative roles of internal and international migratory flows depend on location along the urban-rural spectrum. For large urban areas, net migratory flows from other parts of Canada play a relatively small role. Moreover, we likely overestimate these net flows because of students who grew up in these larger centres returning home after attending university elsewhere. Hence, unless mobility patterns have changed dramatically over the past 40 years, it is unlikely that the high share of degree holders in large urban areas can be attributed to net internal migration.

Immigration was most important in large urban centres, given the tendency for immigrants to concentrate in a few large cities. Reflective of the emphasis on highly educated and skilled immigrants since the 1990s, net immigration accounts for, on average, 42% of the growth of degree holders. Outside of these large urban areas, immigration contributed far less to human capital change, amounting to 19% in medium centres, 8% in small centres and just 4% in rural areas.

Outside of large urban centres, internal migration plays a much more significant role. All urban-rural classes lose degree holders to large urban centres. From the perspective of these smaller urban and rural areas, these are relatively large flows that substantially reduce the number of degree holders, particularly among the young. This pattern tends to reinforce the effect of low in situ rates of growth of degree holders in these places. And yet the impact of these outward flows should be seen as an absolute maximum. Some of these outward flows are made up of degree holders that undoubtedly left large urban centres to obtain their degrees in smaller centres and are merely returning home.

This evidence leads us to conclude that if we are to understand the uneven distribution of human capital, as measured by degree holders in this instance, we have to understand why degree holders chose to move to larger urban centres and, perhaps more importantly, why those who grow up in larger urban areas are more likely to seek postsecondary education. The first question turns on why larger centres are more attractive places to work and live for those with higher levels of human capital. The latter question speaks more to why the motivations and incentives to invest in human capital are different for those that spent their formative years in larger cities. The implication is that human capital may be endogenous to cities and, to the extent that human capital drives economic growth and development, the role of cities as drivers of economic growth looms ever larger.

View the publication Cities and Growth: In Situ versus Migratory Human Capital Growth in PDF format.